Strategic Management

The Evolution

Some Questions
How has the strategy field developed? How has the thinking in strategy evolved? How is the thinking in strategy moving towards? What are the questions in strategy that are not answered? What are the dilemmas and confusions in the field of strategy What have been the loop holes in strategy making? What are the potential models of sustainable strategy?

The Evolution in SM thinking Strategic management is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented - Lamb 1984

Process
Strategy formulation
Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macroenvironmental. Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives. These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

Strategy implementation
Allocation and management of sufficient resources (financial, personnel, time, technology support)
Establishing a chain of command (such as cross functional teams) Assigning responsibility of specific tasks or processes to specific individuals or groups Managing the process This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary. Acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Strategy evaluation
Measuring the effectiveness of the organizational strategy. It's extremely important to conduct a SWOT Analysis to figure out the strengths, weaknesses, opportunities and threats

In corporate strategy, Johnson and Scholes present a model in which strategic options are evaluated against three key success criteria: Suitability (would it work?) Feasibility (can it be made to work?) Acceptability (will they work it?)

General Approaches
The Industrial Organizational Approach
based on economic theory deals with issues like competitive rivalry, resource allocation, economies of scale assumptions rationality, self discipline, behavior, profit maximization

The Sociological Approach

deals primarily with human interactions assumptions bounded rationality, satisfying behavior, profit suboptimality An example of a company that currently operates this way is Google

EVOLUTION OF STRATEGIC MANAGEMENT

1950s
DOMINANT THEME

1960s-early 70s Corporate planning

Mid-70s-mid-80s Positioning

Late 80s 1990s Competitive advantage

2000s Strategic innovation

Budgetary planning & control Financial control

MAIN ISSUES

Planning Selecting Focusing on Reconciling growth &sectors/markets. sources of size with diversification Positioning for competitive flexibility & leadership advantage agility Forecasting. Corporate planning. Synergy Industry analysis Resources & Cooperative Segmentation capabilities. strategy. Experience curve Shareholder Complexity. Portfolio analysis value. Owning E-commerce. standards. Knowledge Management Diversification. Restructuring. Alliances & Global strategies. Reengineering. networks Matrix structures Refocusing. Self-organiz Outsourcing. ation & virtual organization

KEY CONCEPTS & TOOLS

Capital budgeting. Financial planning

MANAGEMENT IMPLICATIONS

Coordination Corporate & control by planning depts. Budgeting created. Rise of systems corporate planning

Nodal Centres
Alfred Chandler Corporate Strategy

John Dunning IB Strategy C K Prahalad Inclusive Strategy

Sumantra Ghoshal Problems in T.C.E.

Historical development of Strategic Management

Birth of strategic management originated in the 1950s and 60s

Alfred D. Chandler, Jr., Philip Selznick, Igor Ansoff, Peter F. Drucker

Alfred Chandler Strategy and Structure structure follows strategy Philip Selznick Organization's internal factors with external environmental circumstances SWOT analysis

Igor Ansoff
market penetration strategies product development strategies market development strategies

horizontal and vertical integration

diversification strategies

Corporate strategy

Peter Drucker
stressed the importance of objectives management by objectives (MBO)

Growth and portfolio theory

Profit Impact of Marketing Strategies (PIMS) effect of market share Started at General Electric, moved to Harvard in the early 1970s, and then moved to the Strategic Planning Institute in the late 1970s, it now contains decades of information on the relationship between profitability and strategy "PIMS provides compelling quantitative evidence as to which business strategies work and don't work" - Tom Peters.

 The Japanese challenge:

Higher employee morale, dedication, and loyalty; Lower cost structure, including wages; Effective government industrial policy; Modernization after WWII leading to high capital intensity and productivity; Economies of scale associated with increased exporting; Relatively low value of the Yen leading to low interest rates and capital costs, low dividend expectations, and inexpensive exports; Superior quality control techniques such as Total Quality Management and other systems introduced by W. Edwards Deming in the 1950s and 60s.

McKinsey 7S Framework Strategy, Structure, Systems, Skills, Staff, Style, and Supra-ordinate goals The Mind of the Strategist was released in America by Kenichi Ohmae Tom Peters -In Search of Excellence

 Gaining competitive advantage Gary Hamel and C. K. Prahalad Strategic intent and strategic architecture Dave Packard and Bill Hewlett devised an active management style that they called Management By Walking Around (MBWA). Michael Porter cost minimization strategies, product differentiation strategies, and market focus strategies

The Military Theorists

Business War Games by Barrie James, 1984 Marketing Warfare by Al Ries and Jack Trout, 1986 Leadership Secrets of Attila the Hun by Wess Roberts , 1987 Philip Kotler was a well-known proponent of marketing warfare strategy Offensive marketing warfare strategies Defensive marketing warfare strategies Flanking marketing warfare strategies Guerrilla marketing warfare strategies

Strategic change
In 1968, Peter Drucker (1969) coined the phrase Age of Discontinuity In 2000, Gary Hamel discussed strategic decay

In 1978, Abell, D. described strategic windows and stressed the importance of the timing (both entrance and exit) of any given strategy

Clayton Christensen (1997) 1-disruptive technology 2-agnostic marketing (no one knows how in what quantities a disruptive product will be used before experiencing the product)

Henry Mintzberg (1988) Strategy was much more fluid and unpredictable than people had thought

 Strategy as plan - a direction, guide, course of action intention rather than actual Strategy as ploy - a maneuver intended to outwit a competitor

Strategy as pattern - a consistent pattern of past behaviour - realized rather than intended
Strategy as position - locating of brands, products, or companies within the conceptual framework of consumers or other stakeholders - strategy determined primarily by factors outside the firm Strategy as perspective - strategy determined primarily by a master strategist

Information and technology driven strategy

Peter Drucker had theorized the rise of the knowledge worker back in the 1950s

In 1990, Peter Senge, who had collaborated with Arie de Geus at Dutch Shell, borrowed de Geus' notion of the learning organization
People can continuously expand their capacity to learn and be productive New patterns of thinking are nurtured Collective aspirations are encouraged, and

People are encouraged to see the whole picture together.

Senge identified five components of a learning organization. They are: Personal responsibility Self reliance Mastery of Mental models Team learning -a spirit of advocacy to a spirit of enquiry Systems thinking

The psychology of strategic management

informal, intuitive, non-routinised, and involving primarily oral, 2-way communications feeling, judgement, sense, proportion, balance, appropriateness.

Criticisms of strategic management

marketing myopia

In 2000, Gary Hamel coined the term strategic convergence Ram Charan, aligning with a popular marketing tagline, believes that strategic planning must not dominate action. "Just do it!",

Journals/Magazines devoted primarily to Strategic Management

Strategic Management Journal Harvard Business Review Long Range Planning The Economist MIT Sloan Management Review Academy of Management Journal